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Most Read: Haier Smart Home Co Ltd, Yum China Holdings Inc, Shanghai Fudan Microelectronics Group, Home Consortium Ltd, Appier Group, Ql Resources, Fuji Oil Holdings, Li Auto, Carbon Revolution Ltd, Skymark Airlines and more

By | Daily Briefs, Most Read

In today’s briefing:

  • HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Dec 2022)
  • FTSE China 50 Index Rebalance: JD Health, Yum China IN; Longfor, Xpeng OUT
  • CES China Semiconductor Chips Index Rebalance: Four Changes in December
  • FTSE EPRA Nareit Index Rebalance: One Deletion for Australia
  • Appier (4180) Nearing A TSE Prime (And TOPIX) Announcement?
  • KLCI Index Rebalance: Preliminary Changes Announced; Should Be Same as Final
  • Itochu Keeps Buying Fuji Oil, Takeover Offer Could Be Possible With Shares Near The Cyclical Bottom
  • Hang Seng Indexes: Rebalances Today; Recent Trading Data
  • Carbon Revolution: SPACed & Smacked
  • Skymark IPO – Valuation

HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Dec 2022)

By Brian Freitas


FTSE China 50 Index Rebalance: JD Health, Yum China IN; Longfor, Xpeng OUT

By Brian Freitas


CES China Semiconductor Chips Index Rebalance: Four Changes in December

By Brian Freitas


FTSE EPRA Nareit Index Rebalance: One Deletion for Australia

By Brian Freitas

  • There are no adds for the FTSE EPRA Nareit Developed Asia Index in December. The only deletion is Home Consortium Ltd (HMC AU)
  • Passive trackers are estimated to sell 12x ADV on Home Consortium Ltd at the close 16 December. Short interest is nearly the same and there could be some covering.
  • Home Consortium Ltd (HMC AU) has underperformed its peers over the last 12 months and still trades more expensive to its peer group.

Appier (4180) Nearing A TSE Prime (And TOPIX) Announcement?

By Travis Lundy

  • On 17 Feb 2022, Janaghan Jeyakumar, CFA wrote about Appier Group (4180 JP) suggesting it was a TOPIX inclusion candidate in the not-distant future.
  • In mid-August 2022, he reiterated his opinion. Three days later, the company said they had applied for TSE Prime membership. We are coming up on the timing for an announcement.
  • It would mean buying, but the shareholder structure is interesting, and intentions are not easy to read. But if they announce imminently, the calendar makes the event even more interesting.

KLCI Index Rebalance: Preliminary Changes Announced; Should Be Same as Final

By Brian Freitas


Itochu Keeps Buying Fuji Oil, Takeover Offer Could Be Possible With Shares Near The Cyclical Bottom

By Oshadhi Kumarasiri

  • Itochu Corp (8001 JP) has restarted accumulating Fuji Oil Holdings (2607 JP) shares, with an acquisition of 3.5m shares during the last-quarter to take its ownership percentage in Fuji-Oil to 44%.
  • With both earnings and valuations at a cyclical bottom, Itochu could be encouraged to accumulate more Fuji Oil shares in the short term, resulting in Fuji Oil outperforming its peers.
  • We think even a takeover offer could be possible while the share price is hovering near the cyclical bottom.

Hang Seng Indexes: Rebalances Today; Recent Trading Data

By Brian Freitas

  • The December rebalance of the HSI INDEX, HSCEI INDEX and HSTECH INDEX takes place at the close today. One-way flow is estimated at HK$8.4bn.
  • There are 3 adds for the HSI INDEX and 4 adds/ 4 deletes for the HSCEI INDEX. There are float changes for a few stocks as well as capping changes. 
  • There is excess volume on most adds/deletes post announcement and short interest has also picked up significantly.

Carbon Revolution: SPACed & Smacked

By David Blennerhassett

  • Following a one-month suspension, carbon-fibre wheel maker Carbon Revolution Ltd (CBR AU) announced it will merge (and delist from the ASX) with Twin Ridge Capital, a US-listed SPAC.
  • CBR said it also requires upward of A$30mn in bridging finance to fund near-term costs (through to June 2023). The share price promptly tanked 50% upon the resumption of trading. 
  • It’s an intriguing situation with an implied notional share price of A$1.49/share under the merger, versus the current price of A$0.15. So I dig a little deeper.

Skymark IPO – Valuation

By Mio Kato

  • Skymark is a little difficult to value given wide dispersions in peer multiples and earnings recovery trajectories. 
  • However, on balance we believe the issue looks to be on the cheap side. 
  • In addition, there are several quirks to the balance sheet, not all of which are negative.

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Most Read: Haier Smart Home Co Ltd, Yum China Holdings Inc, Shanghai Fudan Microelectronics Group, Toyo Construction, Sunshine Insurance, Home Consortium Ltd, Appier Group, HYBE, Posco Chemical Co Ltd and more

By | Daily Briefs, Most Read

In today’s briefing:

  • HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Dec 2022)
  • FTSE China 50 Index Rebalance: JD Health, Yum China IN; Longfor, Xpeng OUT
  • CES China Semiconductor Chips Index Rebalance: Four Changes in December
  • Toyo Construction (1890) – Creeping Up On The Next “Tender Offer Start Date”….. Uh…. Maybe
  • Sunshine Insurance (6963 HK) IPO – Index Inclusion Timeline
  • FTSE EPRA Nareit Index Rebalance: One Deletion for Australia
  • Appier (4180) Nearing A TSE Prime (And TOPIX) Announcement?
  • End of Mandatory Lock-Up Periods for 58 Companies in Korea in December 2022
  • Good Morning Japan | Powell: “Pace of Hikes to Moderate in Dec; Landing Plausible”; Equities Rip
  • CSI KRX China-Korea: Rebalancing Results from KRX & Flow Trading Considerations

HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Dec 2022)

By Brian Freitas


FTSE China 50 Index Rebalance: JD Health, Yum China IN; Longfor, Xpeng OUT

By Brian Freitas


CES China Semiconductor Chips Index Rebalance: Four Changes in December

By Brian Freitas


Toyo Construction (1890) – Creeping Up On The Next “Tender Offer Start Date”….. Uh…. Maybe

By Travis Lundy

  • In March 2022, Toyo Construction (1890 JP) agreed to be taken over by equity affiliate stake owner INFRONEER Holdings (5076 JP) at what was a low price.
  • Nintendo Founder Family Office “YFO” objected, and bought 25+% of the company, then offered to buy it out 30% higher. Toyo Construction objected.
  • Four months later they finally signed an NDA and then started negotiating. Early in November the target date for a Tender Offer start by YFO was pushed to early December.

Sunshine Insurance (6963 HK) IPO – Index Inclusion Timeline

By Brian Freitas

  • Sunshine Insurance (SUN HK) is looking to raise between US$859m-US$950m by selling 1.15bn shares in its IPO. At the top end, the company will be valued at HK$74bn.
  • All of the pre-IPO shares are Domestic Shares and there appear to be no immediate plans to convert them to H-shares. The only H-shares will be the IPO shares.
  • MSCI China inclusion requires a higher stock price or conversion of Domestic Shares to H-shares; FTSE inclusion is likely in June; HSCI and Stock Connect inclusion is expected in March.

FTSE EPRA Nareit Index Rebalance: One Deletion for Australia

By Brian Freitas

  • There are no adds for the FTSE EPRA Nareit Developed Asia Index in December. The only deletion is Home Consortium Ltd (HMC AU)
  • Passive trackers are estimated to sell 12x ADV on Home Consortium Ltd at the close 16 December. Short interest is nearly the same and there could be some covering.
  • Home Consortium Ltd (HMC AU) has underperformed its peers over the last 12 months and still trades more expensive to its peer group.

Appier (4180) Nearing A TSE Prime (And TOPIX) Announcement?

By Travis Lundy

  • On 17 Feb 2022, Janaghan Jeyakumar, CFA wrote about Appier Group (4180 JP) suggesting it was a TOPIX inclusion candidate in the not-distant future.
  • In mid-August 2022, he reiterated his opinion. Three days later, the company said they had applied for TSE Prime membership. We are coming up on the timing for an announcement.
  • It would mean buying, but the shareholder structure is interesting, and intentions are not easy to read. But if they announce imminently, the calendar makes the event even more interesting.

End of Mandatory Lock-Up Periods for 58 Companies in Korea in December 2022

By Douglas Kim

  • We discuss end of the mandatory lock-up periods for 58 stocks in Korea in December 2022, among which 9 are in KOSPI and 49 are in KOSDAQ.
  • These 58 stocks on average could be subject to further selling pressures in December and could underperform relative to the market. 
  • Among these 58 stocks, the top 5 market cap stocks include HYBE, Kakao Games, WCP, Sillajen, and Duksan Neolux. 

Good Morning Japan | Powell: “Pace of Hikes to Moderate in Dec; Landing Plausible”; Equities Rip

By Mark Chadwick

  • Good Morning Japan:  We strive to provide the best macro, stock and thematic overnight news that impacts your trading day in Japan. FOLLOW US TO KEEP ABREAST.
  • OVERSEAS: To Dog Powell confirms 50bps at the next Fed meeting;  Equities rip as it as a “no stock left behind day”; China COVID sentiment continues to improve. 
  • JAPAN: NKY to add 1-2% today; Yen at 130/USD; Eisai says the 2 deaths not due to their drug-positive; Shippers continue to diversify-MOL goes into Real Estate.

CSI KRX China-Korea: Rebalancing Results from KRX & Flow Trading Considerations

By Sanghyun Park

  • KRX unveiled the rebalancing results of the CSI KRX China-Korea indices for Korean constituents yesterday.
  • There is still insufficient evidence data to estimate specific passive impact. The previous rebalancing in June showed no clear correlation between constituent changes and price impact.
  • Although it may be risky to trade on this rebalancing, monitoring the correlation of their passive impact at this point, one year after the release, seems worthwhile.

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Most Read: Hainan Drinda Automotive Trim, Hunan Zhongke Electric Co,Ltd., Daiei Kankyo, Growatt Technology, Haier Smart Home Co Ltd, Sony Corp, Sunshine Insurance, Doosan Bobcat Inc, SBI Holdings and more

By | Daily Briefs, Most Read

In today’s briefing:

  • 2023 High Conviction: Semiconductor Down Market
  • SZSE1000 Index Rebalance: Changes & Potential MSCI/​FTSE Inclusions & Exclusions
  • ChiNext/​ChiNext 50 Index Rebalance: Materials & Industrials Take Spots from IT, Health Care
  • Daiei Kankyo IPO – Final Thoughts on Valuation
  • Growatt Technology IPO: Valuation First Look
  • HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Dec 2022)
  • SONY (6758) | Regulators – Duty Calls
  • Sunshine Insurance Group Pre-IPO – Peer Comparison – Fastest in One Segment, Slowest in the Other
  • Doosan Bobcat Placement – Momentum Is Strong but past Deals Have Been a Mixed Bag
  • JPX-Nikkei 400 Rebal 2023: End-Nov 2022

2023 High Conviction: Semiconductor Down Market

By Jim Handy

  • The current semiconductor market meltdown can be expected to continue through the end of 2024
  • This will reduce 2022 market growth to 5%, and will drive a decline of 19% in 2023
  • Stocks will be unevenly influenced by this, with the most dramatic declines hitting makers of volume commodities, smaller declines in differentiated products, and a weak impact on older technology products.

SZSE1000 Index Rebalance: Changes & Potential MSCI/​FTSE Inclusions & Exclusions

By Brian Freitas

  • There are 47 changes for the SZSE 1000 index that will be implemented at the close of trading on 9 December.
  • We see 51 stocks being added to Shenzhen Stock Connect (47 index adds + 4 existing constituents) and 83 deletions from Stock Connect (15 index adds + 68 existing constituents).
  • There could be 4 adds to the MSCI China in February and 11 adds to the FTSE All-World/All-Cap in March. Plus a bunch of deletes at the close 9 December.

ChiNext/​ChiNext 50 Index Rebalance: Materials & Industrials Take Spots from IT, Health Care

By Brian Freitas

  • There will be 10 changes for the Chinext Price Index and 5 changes for the ChiNext 50 Index. Implementation is at the close on 9 December.
  • One surprise is the inclusion of Hunan Zhongke Electric Co,Ltd. (300035 CH) in both indices. Four stocks are adds to both indices while two stocks are deletes from both indices.
  • The adds have outperformed the deletes over the last 8 months but have given up some of the gains over the last month. There is a big sector skew.

Daiei Kankyo IPO – Final Thoughts on Valuation

By Sumeet Singh

  • Daiei Kankyo (9336 JP)  (DK), a waste management company, aims to raise around US$314m in its Japan IPO.
  • Daiei Kankyo is involved in the waste management and related businesses in Japan. The core of its operations consists of its waste management and recycling business.
  • In our previous notes, we looked at the company’s past performance and undertook a peer comparison. In this note, we talk about final valuations.

Growatt Technology IPO: Valuation First Look

By Arun George


HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Dec 2022)

By Brian Freitas


SONY (6758) | Regulators – Duty Calls

By Mark Chadwick

  • The next six months will be critical for the future of the global gaming industry as Regulators carry out further investigations into the Microsoft acquisition of Activision
  • This is particularly important for SONY, where games account for around one third of consolidated revenue and profits
  • This is a battle for the future of subscription services and cloud streaming – Call of Duty yields unprecedented power over the industry. Regulators need to do their Duty. 

Sunshine Insurance Group Pre-IPO – Peer Comparison – Fastest in One Segment, Slowest in the Other

By Sumeet Singh

  • Sunshine Insurance Group (SIG), a life, health and P&C insurance company, aims to raise up to US$1bn in its HK IPO.
  • SIG is an integrated insurance provider which offers both life and health (L&H) and property and casualty (P&C) insurance in China.
  • We have looked at the company’s past performance in our previous notes. In this note, we will undertake a peer comparison.

Doosan Bobcat Placement – Momentum Is Strong but past Deals Have Been a Mixed Bag

By Ethan Aw

  • Doosan Bobcat Inc (241560 KS) aims to sell a US$145m block. Its recent price momentum is strong but past deals have shown mixed results. 
  • The deal doesn’t appear to be well flagged and is a relatively large one to digest, representing 20.9 days of its three month ADV.  
  • In this note, we will run the deal through our ECM framework and comment on other deal dynamics.

JPX-Nikkei 400 Rebal 2023: End-Nov 2022

By Janaghan Jeyakumar, CFA

  • JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
  • A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
  • Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2023 based on trading data as of end-November 2022.

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Most Read: Nomura Research Institute Ltd, Jafco Co Ltd, ENN Natural Gas, Beijing-Shanghai High Speed Railway-A, King’s Town Bank, Zhejiang Longsheng Group Co.,, Samsung Electronics, HMM Co., Ltd., Skymark Airlines and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Nomura Research Institute (4307) Large Secondary Offering – Demand Profile and Index Implications
  • JAFCO (8595) Yields to Murakami Greenmail – Big Asset Sale, Big Buyback
  • CSI300 Index Rebalance: The Surprises Could Outperform
  • SSE180/​​​SSE380 Index Rebalance: Changes & Potential MSCI/FTSE Inclusions & Exclusions
  • Index Rebalance & ETF Flow Recap: NKY, FTSE AW/CH50/TW50/Div+, Sensex, KLCI, SET50, HSTECH, Huarong
  • CSI 500 Index Rebalance: 50 Changes a Side Leads to 12%+ One-Way Turnover
  • Korea FSC: Major Changes in Foreign Investor Registration & IPO Pricing
  • KOSPI 200 Sector/Size & KRX 300 Sector: Constituent Changes & Trading Points
  • Nomura Research Placement – Somewhat Well Flagged, past Deals Have Done Well but Momentum Is Weak
  • Skymark Airlines IPO – Peer Comparison & Valuation – Asking Too Much for Clipped Wings

Nomura Research Institute (4307) Large Secondary Offering – Demand Profile and Index Implications

By Travis Lundy

  • On Friday, Nomura Research Institute Ltd (4307 JP) announced that Jafco Co Ltd (8595 JP) and Nomura Holdings (8604 JP) would each sell NRI shares in a Secondary Offering.
  • JAFCO is selling to fund a giant buyback. Nomura is selling to round out the offering size. The total is 37mm shares plus greenshoe of 5.5mm shares. 
  • At Friday’s price that is ~¥140bn (including greenshoe), 7% of shares out, 10% of float, and about 25% of Real World Float. There are index implications.

JAFCO (8595) Yields to Murakami Greenmail – Big Asset Sale, Big Buyback

By Travis Lundy

  • Jafco Co Ltd (8595 JP) has long been known as a “cheap” listed “venture fund” because of its additional large (for it) holding in Nomura Research Institute Ltd (4307 JP).
  • Well-Known Japanese activist Yoshiaki MURAKAMI and his related companies bought a stake. JAFCO responded with a “Policy” (poison pill). Murakami-san ducked and dodged then bought more. Now the exit. 
  • JAFCO will sell its Nomura Research shares in a Secondary Offering, and conduct a large buyback via tender offer. Like other Murakami exits, this one is not designed for you. 

CSI300 Index Rebalance: The Surprises Could Outperform

By Brian Freitas

  • There are 15 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) at the upcoming rebalance that will be implemented at the close of trading on 9 December.
  • While most of the deletions are in line with forecasts, there are a few differences on the inclusions as the index committee has used its discretion to overlook some names.
  • The Industrials, Materials and Utilities sectors gain index spots at the expense of Health Care, Financials, Consumer Staples and Consumer Discretionary.

SSE180/​​​SSE380 Index Rebalance: Changes & Potential MSCI/FTSE Inclusions & Exclusions

By Brian Freitas

  • There are 18 changes to the SSE180 Index and 38 changes to the SSE380 Index that will be implemented at the close of trading on 9 December.
  • There will be 10 deletions from the MSCI Standard Index and 26 deletions from the FTSE All-World/All-Cap indices at the close on 9 December.
  • Currently, 8 stocks meet the threshold/are close for inclusion in the MSCI China Index while there are 21 stocks that meet the threshold for inclusion in the FTSE All-World/All-Cap indices.

Index Rebalance & ETF Flow Recap: NKY, FTSE AW/CH50/TW50/Div+, Sensex, KLCI, SET50, HSTECH, Huarong

By Brian Freitas


CSI 500 Index Rebalance: 50 Changes a Side Leads to 12%+ One-Way Turnover

By Brian Freitas

  • There are 50 changes a side for the CSI 500 Index at the upcoming rebalance that will be implemented at the close of trading on 9 December.
  • One-Way turnover at the rebalance is estimated at 12.64% leading to a one-way trade of CNY 9.3bn. The Materials, Information Technology and Consumer Discretionary sectors are net gainers.
  • 9 adds to the CSI 500 Index are deletes from the CSI 300 Index while 7 deletes from the CSI 500 Index are adds to the CSI 300 Index.

Korea FSC: Major Changes in Foreign Investor Registration & IPO Pricing

By Sanghyun Park

  • FSC’s unveiled measures: 1. declare a dividend before determining which shareholder to receive, 2. scrap foreign investor ID, & 3. widen price limit on a listing day & allow “test-the-waters”
  • These are still drafts, but since they have already been coordinated with the Yoon administration, it is highly likely that they will be implemented in the not-too-distant future.
  • FSC will disclose detailed plans next month. We should rush to prepare for them, which significantly impacts the increase in foreign investors’ trading volume and the IPO pricing.

KOSPI 200 Sector/Size & KRX 300 Sector: Constituent Changes & Trading Points

By Sanghyun Park

  • The additional Lotte Confectionery/Samyang Holdings flow will come from K200/KRX 300 Consumer Staples, K200 MidSmallCap, and K200 Ex-Top. However, the actual flow impact wouldn’t be significant.
  • From a flow trading standpoint, the KOSPI 50’s HMM/Hanon System probably deserves our attention because additional inflows come from the pensions that account for more than half of local PASSIVE.
  • Since their rebalancing trading tends to be somewhat dispersed, the return rate was the best when the position holding period was from T-3 to the effective date.

Nomura Research Placement – Somewhat Well Flagged, past Deals Have Done Well but Momentum Is Weak

By Sumeet Singh


Skymark Airlines IPO – Peer Comparison & Valuation – Asking Too Much for Clipped Wings

By Ethan Aw

  • Skymark Airlines (9204 JP) is looking to raise approximately US$235m in its Japan IPO.
  • Skymark Airlines (SA) is a Japanese low-cost airline, being the third largest domestic airline  according to the company. Unlike major airlines and other low-cost carriers, Skymark operates only domestic flights.
  • In our previous notes, we looked at the company’s past performance. In this note, we talk about peer comparison and valuations.

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Most Read: ENN Natural Gas, Jafco Co Ltd, Nomura Research Institute Ltd, King’s Town Bank, Trina Solar Co Ltd, Shanghai United Imaging Healthcare, Zhejiang Longsheng Group Co.,, Keppel Corp, Beijing-Shanghai High Speed Railway-A, Socionext and more

By | Daily Briefs, Most Read

In today’s briefing:

  • CSI300 Index Rebalance: The Surprises Could Outperform
  • JAFCO (8595) Yields to Murakami Greenmail – Big Asset Sale, Big Buyback
  • Nomura Research Institute (4307) Large Secondary Offering – Demand Profile and Index Implications
  • Index Rebalance & ETF Flow Recap: NKY, FTSE AW/CH50/TW50/Div+, Sensex, KLCI, SET50, HSTECH, Huarong
  • SSE50 Index Rebalance: In Line with Forecasts; Trades Performing Well
  • STAR50 Index Rebalance: Adds Outperform Deletes in the Last Week
  • CSI 500 Index Rebalance: 50 Changes a Side Leads to 12%+ One-Way Turnover
  • Sembcorp Marine Takeover of Keppel O&M – Almost There
  • SSE180/​​​SSE380 Index Rebalance: Changes & Potential MSCI/FTSE Inclusions & Exclusions
  • Socionext (6526 JP) TOPIX Inclusion – Great Performer Deserves Profit-Taking

CSI300 Index Rebalance: The Surprises Could Outperform

By Brian Freitas

  • There are 15 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) at the upcoming rebalance that will be implemented at the close of trading on 9 December.
  • While most of the deletions are in line with forecasts, there are a few differences on the inclusions as the index committee has used its discretion to overlook some names.
  • The Industrials, Materials and Utilities sectors gain index spots at the expense of Health Care, Financials, Consumer Staples and Consumer Discretionary.

JAFCO (8595) Yields to Murakami Greenmail – Big Asset Sale, Big Buyback

By Travis Lundy

  • Jafco Co Ltd (8595 JP) has long been known as a “cheap” listed “venture fund” because of its additional large (for it) holding in Nomura Research Institute Ltd (4307 JP).
  • Well-Known Japanese activist Yoshiaki MURAKAMI and his related companies bought a stake. JAFCO responded with a “Policy” (poison pill). Murakami-san ducked and dodged then bought more. Now the exit. 
  • JAFCO will sell its Nomura Research shares in a Secondary Offering, and conduct a large buyback via tender offer. Like other Murakami exits, this one is not designed for you. 

Nomura Research Institute (4307) Large Secondary Offering – Demand Profile and Index Implications

By Travis Lundy

  • On Friday, Nomura Research Institute Ltd (4307 JP) announced that Jafco Co Ltd (8595 JP) and Nomura Holdings (8604 JP) would each sell NRI shares in a Secondary Offering.
  • JAFCO is selling to fund a giant buyback. Nomura is selling to round out the offering size. The total is 37mm shares plus greenshoe of 5.5mm shares. 
  • At Friday’s price that is ~¥140bn (including greenshoe), 7% of shares out, 10% of float, and about 25% of Real World Float. There are index implications.

Index Rebalance & ETF Flow Recap: NKY, FTSE AW/CH50/TW50/Div+, Sensex, KLCI, SET50, HSTECH, Huarong

By Brian Freitas


SSE50 Index Rebalance: In Line with Forecasts; Trades Performing Well

By Brian Freitas

  • There are 5 changes for the SSE50 Index that will be implemented at the close on 9 December. Passive selling on a few deletions is pretty large.
  • We estimate a one-way turnover of 4.07% at the December rebalance leading to a one-way trade of CNY 3.36bn. Index arb activity could add to the impact on the stocks.
  • The adds have dropped over the last few months while the deletes have moved higher. There could be a reversion of that trend till implementation of the changes.

STAR50 Index Rebalance: Adds Outperform Deletes in the Last Week

By Brian Freitas

  • The index committee has continued to use a 6-month minimum listing history leading to five changes to the SSE STAR50 (STAR50 INDEX) in December.
  • All changes are in line with our forecasts and there appears to be some pre-positioning over the last week as the deletes have sold off hard.
  • One-Way turnover is estimated at 5.34% and will result in a one-way trade of CNY 3,766m. The estimated impact on the deletes is higher than that on the adds.

CSI 500 Index Rebalance: 50 Changes a Side Leads to 12%+ One-Way Turnover

By Brian Freitas

  • There are 50 changes a side for the CSI 500 Index at the upcoming rebalance that will be implemented at the close of trading on 9 December.
  • One-Way turnover at the rebalance is estimated at 12.64% leading to a one-way trade of CNY 9.3bn. The Materials, Information Technology and Consumer Discretionary sectors are net gainers.
  • 9 adds to the CSI 500 Index are deletes from the CSI 300 Index while 7 deletes from the CSI 500 Index are adds to the CSI 300 Index.

Sembcorp Marine Takeover of Keppel O&M – Almost There

By Travis Lundy

  • Last Wednesday, Keppel Corp (KEP SP) announced 8 Dec as the EGM date for shareholders to approve the AssetCo Transfer, the Keppel O&M/SMM combo, and the distribution of SMM shares.
  • This should probably sail through. Investors who want to submit questions in advance can email [email protected] by 3pm 30 Nov.
  • I still like Keppel. I think investors will find it attractive post-spin.

SSE180/​​​SSE380 Index Rebalance: Changes & Potential MSCI/FTSE Inclusions & Exclusions

By Brian Freitas

  • There are 18 changes to the SSE180 Index and 38 changes to the SSE380 Index that will be implemented at the close of trading on 9 December.
  • There will be 10 deletions from the MSCI Standard Index and 26 deletions from the FTSE All-World/All-Cap indices at the close on 9 December.
  • Currently, 8 stocks meet the threshold/are close for inclusion in the MSCI China Index while there are 21 stocks that meet the threshold for inclusion in the FTSE All-World/All-Cap indices.

Socionext (6526 JP) TOPIX Inclusion – Great Performer Deserves Profit-Taking

By Travis Lundy

  • Socionext (6526 JP) was offered in a range of ¥3,480-3,650, oversubscribed, IPOed at ¥3,650 and closed ¥4200 on Day 1. We can assume that was the “right price.” 
  • Since then, while peers are up 19.8% in the 6 weeks since then, Socionext is up 66%. This year’s biggest Japan IPO has been a big winner.
  • The TOPIX inclusion is on Tuesday at the close. Beware, you don’t know who is in the stock and who is not.

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Most Read: Highwealth Construction, Oriental Land, Golden Agri Resources, Semiconductor Manufacturing International Corp (SMIC), Far Eastern New Century, JD Health, Meituan, ENN Natural Gas, Shanghai United Imaging Healthcare, Oci Co Ltd and more

By | Daily Briefs, Most Read

In today’s briefing:

  • FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: 46% One-Way Turnover and US$5bn Two-Way Trade
  • Nikkei 225 Index Rebalance Preview (March): Three Potential Changes & Large Funding Trade
  • FTSE All-World/​​​All-Cap Index Rebalance: Watch Golden Agri-Resources & Delhivery
  • Hang Seng TECH Index Rebalance: Float & Capping Changes
  • FTSE TWSE Taiwan 50 Index Rebalance Preview: Far Eastern Could Replace AUO
  • FTSE China 50 Index Rebalance Preview: JD Health Could Replace Xpeng
  • 2023 High Conviction Ideas: Meituan
  • CSI300 Index Rebalance: The Surprises Could Outperform
  • STAR50 Index Rebalance: Adds Outperform Deletes in the Last Week
  • OCI Spin-Off: Trade Opportunities Post Relisting, Valuations, & Impact on KOSPI 200

FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: 46% One-Way Turnover and US$5bn Two-Way Trade

By Brian Freitas

  • Today is the review cutoff for dividend data and stock prices that will be used to select the inclusions and exclusions as well as for capping of index weights.
  • We see 26 adds and 5 deletes for the index at the December rebalance resulting in one-way turnover of 46% and a one-way trade of TWD 78.1bn (US$2.51bn). 
  • Passive trackers will need to buy over 5 days of ADV on 15 stocks and sell over 5 days of ADV on 19 stocks and this will present trading opportunities.

Nikkei 225 Index Rebalance Preview (March): Three Potential Changes & Large Funding Trade

By Brian Freitas


FTSE All-World/​​​All-Cap Index Rebalance: Watch Golden Agri-Resources & Delhivery

By Brian Freitas


Hang Seng TECH Index Rebalance: Float & Capping Changes

By Brian Freitas

  • As expected, there are no adds or deletes for the Hang Seng Tech Index (HSTECH INDEX) in December. However, there are plenty of capping and float changes to drive flows.
  • The December rebalance is expected to have a one-way turnover of 2.3% resulting in a one-way trade of HK$1.9bn.
  • Short interest is greater than 5% of float on a few stocks and a continued recovering in markets could lead to a squeeze higher.

FTSE TWSE Taiwan 50 Index Rebalance Preview: Far Eastern Could Replace AUO

By Brian Freitas


FTSE China 50 Index Rebalance Preview: JD Health Could Replace Xpeng

By Brian Freitas


2023 High Conviction Ideas: Meituan

By Xin Yu, CFA

  • Meituan is a leading “service e-commerce” platform in China, leveraging technology to connect consumers with merchants.
  • With the gradual re-opening in 2023, core local commerce will deliver better than expected result.
  • Tencent’s distribution of Meituan shares provides a good entry point. 

CSI300 Index Rebalance: The Surprises Could Outperform

By Brian Freitas

  • There are 15 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) at the upcoming rebalance that will be implemented at the close of trading on 9 December.
  • While most of the deletions are in line with forecasts, there are a few differences on the inclusions as the index committee has used its discretion to overlook some names.
  • The Industrials, Materials and Utilities sectors gain index spots at the expense of Health Care, Financials, Consumer Staples and Consumer Discretionary.

STAR50 Index Rebalance: Adds Outperform Deletes in the Last Week

By Brian Freitas

  • The index committee has continued to use a 6-month minimum listing history leading to five changes to the SSE STAR50 (STAR50 INDEX) in December.
  • All changes are in line with our forecasts and there appears to be some pre-positioning over the last week as the deletes have sold off hard.
  • One-Way turnover is estimated at 5.34% and will result in a one-way trade of CNY 3,766m. The estimated impact on the deletes is higher than that on the adds.

OCI Spin-Off: Trade Opportunities Post Relisting, Valuations, & Impact on KOSPI 200

By Douglas Kim

  • After the spin-off and relisting of holdco/opco shares, we believe that there is a greater probability of OCI Co (opco) shares outperforming OCI Holdings (holdco).
  • However, the degree of outperformance of OCI Co vs OCI Holdings is not likely to be similar to other recent spin-offs such as F&F Co and F&F Holdings.
  • We have a long-term bullish view of OCI over the next one to two years. It is trading at P/E of 3.1x and P/B of 0.6x based 2022 earnings estimates.

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Most Read: Highwealth Construction, Oriental Land, HLB Inc, Lockon Co Ltd, GoTo, DPC Dash, AviChina Industry & Technology H, Sea Ltd, Growatt Technology, Oci Co Ltd and more

By | Daily Briefs, Most Read

In today’s briefing:

  • FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: 46% One-Way Turnover and US$5bn Two-Way Trade
  • Nikkei 225 Index Rebalance Preview (March): Three Potential Changes & Large Funding Trade
  • A Guide to Arb Trade in Rights Offer: Feat. HLB & Lotte Chemical
  • Meituan Index Flows Clarifications on the Tencent Distribution; Prosus Comments on Its Holdings
  • 2023 High Conviction – GoTo – Burnt Through All Cash From the IPO, Weakest Cash Position Among Peers
  • DPC Dash Pre-IPO – The Positives – On a Rapid Expansion Spree
  • 2023 High Conviction: AviChina Industry (2357 HK) – The Sky Is the Limit
  • Sea Ltd (SE US) – Wind Back in the Sails
  • Growatt Technology Pre-IPO – Still Looks Good, Updated Thoughts on Valuation
  • Trading Considerations on the OCI Demerger

FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: 46% One-Way Turnover and US$5bn Two-Way Trade

By Brian Freitas

  • Today is the review cutoff for dividend data and stock prices that will be used to select the inclusions and exclusions as well as for capping of index weights.
  • We see 26 adds and 5 deletes for the index at the December rebalance resulting in one-way turnover of 46% and a one-way trade of TWD 78.1bn (US$2.51bn). 
  • Passive trackers will need to buy over 5 days of ADV on 15 stocks and sell over 5 days of ADV on 19 stocks and this will present trading opportunities.

Nikkei 225 Index Rebalance Preview (March): Three Potential Changes & Large Funding Trade

By Brian Freitas


A Guide to Arb Trade in Rights Offer: Feat. HLB & Lotte Chemical

By Sanghyun Park

  • This post will specifically examine arb trade opportunities during the subscription rights trading period, with the recent HLB and Lotte Chemical cases.
  • HLB gave an arb yield of 8%. As for Lotte Chemical, the size (₩1.1T) is much bigger, and it carries single-stock futures, a powerful incentive for arb traders.
  • Another thing for Lotte Chemical is that it is unclear whether the major shareholders will participate in the subscription, which can lead to a widening of our arb spread.

Meituan Index Flows Clarifications on the Tencent Distribution; Prosus Comments on Its Holdings

By Travis Lundy

  • Days after the Tencent (700 HK) announcement about its planned distribution of the bulk of the Meituan (3690 HK) shares it owns, the Hang Seng Index team clarified index treatment.
  • It will be treated in HS Indices as a “listed non-cash distribution” for Tencent. There is theoretically wiggle room on the Meituan side, but it appears it will follow JD.com.
  • That means Meituan selling on 4 January at the close, limbo for two months, then Meituan buying. Full model below.

2023 High Conviction – GoTo – Burnt Through All Cash From the IPO, Weakest Cash Position Among Peers

By Clarence Chu

  • In Mar 2022, GoTo (GOTO IJ) raised around US$1bn from what was essentially a domestic Indonesian IPO. 
  • GoTo has already burnt through the cash it raised from the listing and cash burn still remains high, while its cash balance is amongst the lowest in its peer set.
  • At its current cash burn pace, the company will have to come to the markets again soon.

DPC Dash Pre-IPO – The Positives – On a Rapid Expansion Spree

By Sumeet Singh

  • DPC Dash aims to raise around US$100m in its Hong Kong IPO. 
  • The company is the exclusive master franchisee for Domino’s Pizza in China, HK and Macau. DPC operated 562 stores across 13 cities, as of Nov 2022.
  • In this note, we will talk about the positive aspects of the deal.

2023 High Conviction: AviChina Industry (2357 HK) – The Sky Is the Limit

By Osbert Tang, CFA

  • AviChina Industry & Technology H (2357 HK) offers unique exposure to China’s aerospace and defense sector and it will ride on China’s ambition to solidify its military strengths. 
  • We think the key drivers are increase in civil and defense demand, commercialisation of C919 aircraft, localisation of helicopters and potential for corporate restructuring.
  • The stock is undervalued with its holdings in four listed A-shares amounted to Rmb70.6bn, against its own market cap of HK$25bn. Also, earnings multiples are cheap relative to global peers.

Sea Ltd (SE US) – Wind Back in the Sails

By Angus Mackintosh

  • Sea Ltd 3Q2022 results should be seen as the poster child for the rest of the space given a crystal clear focus on profitability and pragmatic approach to future growth.
  • The fact that the company is now contribution margin positive in ASEAN and even Adjusted EBITDA positive in Malaysia and Taiwan is a testament to its success in controlling costs. 
  • Sea Ltd (SE US) has seen a significant compression in valuations and now looks attractive on 2.1x FY2023V EV/Sales and 1.7x FY2024E EV/Sales.

Growatt Technology Pre-IPO – Still Looks Good, Updated Thoughts on Valuation

By Ethan Aw

  • Growatt Technology (1833969D CH) is looking to raise about US$1bn in its upcoming Hong Kong IPO. 
  • Growatt Technology is a global distributed energy solution provider, specializing in sustainable energy generation, storage and consumption, as well as energy digitalization. 
  • In our previous notes, we looked at various aspects of the company’s performance. In this note, we’ll provide our updated thoughts on the company’s valuation. 

Trading Considerations on the OCI Demerger

By Sanghyun Park

  • Value accretion by unlocking the voting eligibility of treasury shares won’t happen as the company holds no treasury share.
  • But KOSPI 200 passive flows will pose a noteworthy trading point. PASSIVE’s selling outflow will be about 700-800K shares, 1.6x ADTV.
  • Market cap imbalance, primarily driven by the tender offer dynamic and the split ratio that is excessively focused on Holdco, will likely exacerbate Holdco → Opco migration after re-listing.

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The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

  • ✓ Unlimited Research Summaries
  • ✓ Personalised Alerts
  • ✓ Custom Watchlists
  • ✓ Company Data and News
  • ✓ Events & Webinars

Most Read: Oriental Land, JD Health, HLB Inc, GoTo, Lockon Co Ltd, Adani Enterprises, Dexus Property, Korea Zinc, Skymark Airlines and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Nikkei 225 Index Rebalance Preview (March): Three Potential Changes & Large Funding Trade
  • FTSE China 50 Index Rebalance Preview: JD Health Could Replace Xpeng
  • A Guide to Arb Trade in Rights Offer: Feat. HLB & Lotte Chemical
  • GoTo IPO Lockup Expiry – US$13bn Lockup Release or in Other Words, the Real IPO
  • Meituan Index Flows Clarifications on the Tencent Distribution; Prosus Comments on Its Holdings
  • Adani Enterprises – A Record Follow-On Public Offering May Be in the Works
  • Australia REITs:  Asset Deflation Bear Market
  • Korea Zinc: Treasury Shares Swap with LG Chem & Hanwha Corp + Treasury Share Sale
  • Skymark IPO – Ready For Takeoff
  • Good Morning Japan | US Thanksgiving but Rally Continues in Europe

Nikkei 225 Index Rebalance Preview (March): Three Potential Changes & Large Funding Trade

By Brian Freitas


FTSE China 50 Index Rebalance Preview: JD Health Could Replace Xpeng

By Brian Freitas


A Guide to Arb Trade in Rights Offer: Feat. HLB & Lotte Chemical

By Sanghyun Park

  • This post will specifically examine arb trade opportunities during the subscription rights trading period, with the recent HLB and Lotte Chemical cases.
  • HLB gave an arb yield of 8%. As for Lotte Chemical, the size (₩1.1T) is much bigger, and it carries single-stock futures, a powerful incentive for arb traders.
  • Another thing for Lotte Chemical is that it is unclear whether the major shareholders will participate in the subscription, which can lead to a widening of our arb spread.

GoTo IPO Lockup Expiry – US$13bn Lockup Release or in Other Words, the Real IPO

By Sumeet Singh

  • In Mar 2022, GoTo raised around US$1bn from what was essentially a domestic Indonesian IPO. Its pre-IPO shareholders will be released from their lockup soon.
  • GoTo was formed in May 2021 as a result of a merger between two of Indonesia’s largest unicorns Gojek, leading player in ride hailing, and Tokopedia, leading e-commerce player.
  • In this note, we will talk about the upcoming lockup expiry.

Meituan Index Flows Clarifications on the Tencent Distribution; Prosus Comments on Its Holdings

By Travis Lundy

  • Days after the Tencent (700 HK) announcement about its planned distribution of the bulk of the Meituan (3690 HK) shares it owns, the Hang Seng Index team clarified index treatment.
  • It will be treated in HS Indices as a “listed non-cash distribution” for Tencent. There is theoretically wiggle room on the Meituan side, but it appears it will follow JD.com.
  • That means Meituan selling on 4 January at the close, limbo for two months, then Meituan buying. Full model below.

Adani Enterprises – A Record Follow-On Public Offering May Be in the Works

By Travis Lundy

  • Adani Enterprises (ADE IN) (“ADL”) on Tuesday announced a Board Meeting for Friday to consider capital raising options. Multiple media sources suggest a record Indian Follow-on Public Offering of INR200bn.
  • The company has bid for/bought multiple assets recently, and proposed investments plan of up to US$150bn in 10yrs in renewables, cement, airports, healthcare to aim at a US$1trln valuation.
  • This will get complicated, interesting, and is not necessarily going to come out well.

Australia REITs:  Asset Deflation Bear Market

By David Blennerhassett

  • The S&P/ASX A-REIT 200 Index has returned -22% in FY22, underperforming the ASX 200 Index by ~17% basis points.
  • REIT performance is typically negatively correlated with bond yield movements, however, long-dated government bond yields may be approaching their peak.
  • The asset deflation bear market in FY22 has improved the REIT valuation. A basket of REITs is currently at 0.8x, versus the five-year average of 1.05x, and 1.1x pre-Covid. 

Korea Zinc: Treasury Shares Swap with LG Chem & Hanwha Corp + Treasury Share Sale

By Douglas Kim

  • On 23 November, Korea Zinc announced that it will swap its treasury shares with LG Chem and Hanwha Corp and sell part of its treasury shares to other investors.
  • Korea Zinc could gain additional dividend payments by exchanging part of its treasury shares with shares of LG Chem and Hanwha Corp. 
  • Potential separation of Young Poong and Korea Zinc between the Choi and Jang families is likely to be an on-going process, although it is difficult to tell the exact timing. 

Skymark IPO – Ready For Takeoff

By Mio Kato

  • Skymark will be re-listing following a successful turnaround under the guidance of ANA and Integral. 
  • Listing proceeds will mainly be directed towards improving the fuel efficiency of its fleet. 
  • Skymark offers an attractive play on reopening in Japan as it is geared into the simpler domestic market where elevated cargo rates and revenue per passenger are not downside risks.

Good Morning Japan | US Thanksgiving but Rally Continues in Europe

By Mark Chadwick

  • Good Morning Japan:  We strive to provide the very best breaking macro, stock and thematic overnight news that will impact your trading day in Japan.  FOLLOW US to keep abreast!
  • OVERSEAS: US Thanksgiving holidays;  US out but rally continues: STOXX Europe 600  +0.46%;  US Equity Futs +0.26%;  China Covid #s hit record high ; Rare China covid protest; Twitter Amnesty
  • JAPAN: NISA 2x expansion to ¥56trn targeted;  START UPS: Govt tgts 100k start-ups/ ¥10trn investments; EV: Aisin Seiki expanding E-Axle production; NINTENDO: Pokemon hits 10m sales

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  • ✓ Unlimited Research Summaries
  • ✓ Personalised Alerts
  • ✓ Custom Watchlists
  • ✓ Company Data and News
  • ✓ Events & Webinars

Most Read: IBF Financial Holdings, China Huarong Asset Management, Delta Electronics Thai, GoTo, Total Access Communication, HLB Inc, Alibaba (ADR), Keppel Corp, Mori Trust Sogo Reit, Oriental Land and more

By | Daily Briefs, Most Read

In today’s briefing:

  • FTSE TWSE Taiwan Div+ Index: Recent Performance & Potential Trades
  • China Huarong (2799 HK): Full Circulation & MSCI/FTSE Index Inclusion
  • SET50 Index Rebalance Preview: Four Potential Changes in December
  • GoTo IPO Lockup Expiry – US$13bn Lockup Release or in Other Words, the Real IPO
  • Disaster As VTOs Cancelled Under DTAC/True Merger
  • A Guide to Arb Trade in Rights Offer: Feat. HLB & Lotte Chemical
  • Alibaba (BABA US): Fighting Back
  • Keppel (KEP SP) Vote on Keppel O&M and Sembcorp Marine Transaction on 8 Dec
  • Mori Trust Sogo – Mori Trust Hotel REIT Merger
  • Nikkei 225 Index Rebalance Preview (March): Three Potential Changes & Large Funding Trade

FTSE TWSE Taiwan Div+ Index: Recent Performance & Potential Trades

By Brian Freitas

  • The review period for the FTSE TWSE Taiwan Dividend+ index ended Monday, 21 November. We forecast 26 adds/ 5 deletes in December – the flows are huge.
  • Stocks with potential inflows have outperformed stocks with potential outflows over multiple time periods going back a month. Yesterday was an especially good day for the strategy.
  • We expect continued pre-positioning ahead of the passive flows will help the stocks with inflows outperform stocks with outflows. A reversal of performance could come post implementation.

China Huarong (2799 HK): Full Circulation & MSCI/FTSE Index Inclusion

By Brian Freitas

  • China Huarong Asset Management (2799 HK) has announced the full conversion of 8.358bn Domestic Shares to H-shares. The increased float could help the stock get added to the MSCI/FTSE indices.
  • Depending on when the conversion is completed, the stock could be added to the MSCI China Index at the February QCIR though inclusion in May is more likely.
  • There is a high probability of inclusion in the FTSE indices at the March SAIR – though it remains to be seen if that’s to the All-World or All-Cap Index.

SET50 Index Rebalance Preview: Four Potential Changes in December

By Brian Freitas

  • The market cap review period for the December rebalance of the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) ends in 6 trading days.
  • Following the market consultation and reduction in the turnover ratio, there could be four changes to the index. The DTAC/TRUE merger could result in another inclusion in Q1 2023.
  • Estimated one-way turnover at the December rebalance is 8.1% and will result in a one-way trade of THB 7.4bn. More than 1x ADV to trade on most stocks.

GoTo IPO Lockup Expiry – US$13bn Lockup Release or in Other Words, the Real IPO

By Sumeet Singh

  • In Mar 2022, GoTo raised around US$1bn from what was essentially a domestic Indonesian IPO. Its pre-IPO shareholders will be released from their lockup soon.
  • GoTo was formed in May 2021 as a result of a merger between two of Indonesia’s largest unicorns Gojek, leading player in ride hailing, and Tokopedia, leading e-commerce player.
  • In this note, we will talk about the upcoming lockup expiry.

Disaster As VTOs Cancelled Under DTAC/True Merger

By David Blennerhassett

  • The conditions precedent to the VTO have not been satisfied within one year from 22 November 2021 … the parties have declined to carry out the VTO.
  • This statement was lifted from Telenor’s (the major shareholder of Total Access Communication (DTAC TB)) brief announcement. Telenor/CP Group aim to complete the transaction within the first quarter of 2023
  • This appears a cop-out on behalf of both Tender Offerors (Telenor & CP Group), who probably could have pushed for an extension.  And why weren’t the scrip terms addressed?

A Guide to Arb Trade in Rights Offer: Feat. HLB & Lotte Chemical

By Sanghyun Park

  • This post will specifically examine arb trade opportunities during the subscription rights trading period, with the recent HLB and Lotte Chemical cases.
  • HLB gave an arb yield of 8%. As for Lotte Chemical, the size (₩1.1T) is much bigger, and it carries single-stock futures, a powerful incentive for arb traders.
  • Another thing for Lotte Chemical is that it is unclear whether the major shareholders will participate in the subscription, which can lead to a widening of our arb spread.

Alibaba (BABA US): Fighting Back

By Steven Holden

  • Ownership in Alibaba Group Holdings is on the rise among active Greater China managers. 
  • Stock price below $100 a catalyst for active Greater China managers to buy back in, with Invesco, JP Morgan and E Fund among those opening positions
  • Alibaba remains well behind both TSMC and Tencent on an average weight basis and is the 2nd largest underweight in the Greater China region.

Keppel (KEP SP) Vote on Keppel O&M and Sembcorp Marine Transaction on 8 Dec

By Arun George

  • Keppel Corp (KEP SP)’s EGM on 8 December requires majority shareholder approval of two ordinary resolutions. The IFA notes that the transaction terms are “not prejudicial” to minorities.
  • Keppel shareholders will be supportive due to attractive terms. The other key conditions precedent is Sembcorp Marine (SMM SP) shareholders and regulatory approvals (SGX-ST and Maritime Port Authority of Singapore). 
  • The deal is expected to close by the end of the year. Our Keppel SoTP valuation is S$8.30 per share, which is 12% above the last close.

Mori Trust Sogo – Mori Trust Hotel REIT Merger

By Travis Lundy

  • Yesterday, Mori Trust Sogo Reit (8961 JP) (MTR) and Mori Trust Hotel Reit (3478 JP) (MTH) announced a merger to be effective 1 March 2023. MTR will be the survivor.
  • The ratio is 1.00 : 0.92 MTR:MTH but MTR will conduct a 2:1 stock split on effective date to make it 1.00 : 1.84 to allow retail to continue holding.
  • This will effectively increase the size of MTR by 35%, and re-distributes earnings structure. There will be index consequences.

Nikkei 225 Index Rebalance Preview (March): Three Potential Changes & Large Funding Trade

By Brian Freitas


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Most Read: Highwealth Construction, Taiwan Glass Industry, Taiwan Secom, Meritz Financial Group, JD Health, Ql Resources, Delta Electronics Thai, China Huarong Asset Management, Link Administration, Skymark Airlines and more

By | Daily Briefs, Most Read

In today’s briefing:

  • FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: 46% One-Way Turnover and US$5bn Two-Way Trade
  • Taiwan Div+ Index Dec22 Rebal Trade Up 6% So Far – Small Changes To Basket But HODL Til The End
  • FTSE TWSE Dividend+ Dec 22 Quiddity Final Expectations: Crucial Shift in Tracking AUM a GAME CHANGER
  • Meritz Merger Event: Swap Conditions, Spread Arb Trade, & K200 Flow Implementation
  • FTSE China 50 Index Rebalance Preview: JD Health Could Replace Xpeng
  • KLCI Index Rebalance Preview: No More Glovemakers in the Index (Or How the Mighty Have Fallen)
  • SET50 Index Rebalance Preview: Four Potential Changes in December
  • China Huarong (2799 HK): Full Circulation & MSCI/FTSE Index Inclusion
  • Link Admin Is Cheap Amid PEXA In-Specie And Possible BCM/CM Sale
  • Skymark Airlines Pre-IPO – Highly Leveraged with a History of Bankruptcy

FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: 46% One-Way Turnover and US$5bn Two-Way Trade

By Brian Freitas

  • Today is the review cutoff for dividend data and stock prices that will be used to select the inclusions and exclusions as well as for capping of index weights.
  • We see 26 adds and 5 deletes for the index at the December rebalance resulting in one-way turnover of 46% and a one-way trade of TWD 78.1bn (US$2.51bn). 
  • Passive trackers will need to buy over 5 days of ADV on 15 stocks and sell over 5 days of ADV on 19 stocks and this will present trading opportunities.

Taiwan Div+ Index Dec22 Rebal Trade Up 6% So Far – Small Changes To Basket But HODL Til The End

By Travis Lundy

  • The Taiwan Div+ cutoff date for the data used to calculate the Dec 2022 rebalance was yesterday’s close. Janaghan Jeyakumar, CFA has published two updates. 
  • I recommended a long vs short basket on 26 October. So far that long vs short basket is +6.1%. I recommend adjusting the basket to new names and continuing.
  • Historically, the pattern from cutoff to date to Inclusion and then Inclusion to Inclusion+20 is quite clean. I would not expect differently this time. 

FTSE TWSE Dividend+ Dec 22 Quiddity Final Expectations: Crucial Shift in Tracking AUM a GAME CHANGER

By Janaghan Jeyakumar, CFA

  • In October 2022, FTSE Russell confirmed that the number of constituents in the FTSE TWSE Taiwan Dividend+ Index will be increased from 30 to 50 during the December 2022 Rebalance.
  • Considering the combined effect of expected index changes and capping flows, there could be 27 potential inflows names and 28 potential outflow names with total one-way flow size of US$2.45bn.
  • There are multiple names on both sides with several days of volume to trade.

Meritz Merger Event: Swap Conditions, Spread Arb Trade, & K200 Flow Implementation

By Sanghyun Park

  • The last trading day to secure appraisal rights is today (the 22nd). You must buy stocks by today to make arb trade possible using appraisal rights.
  • We should consider LONG FINANCIAL SHORT FIRE/SECURITIES. KSD allows us to maintain borrowed stocks of the target company without redemption procedures if new stocks are listed after the merger.
  • K200 trackers will have to buy in for FIRE at the close on January 27, whereas SECURITIES will be on March 31. We should design a setup targeting this preemptively.

FTSE China 50 Index Rebalance Preview: JD Health Could Replace Xpeng

By Brian Freitas


KLCI Index Rebalance Preview: No More Glovemakers in the Index (Or How the Mighty Have Fallen)

By Brian Freitas


SET50 Index Rebalance Preview: Four Potential Changes in December

By Brian Freitas

  • The market cap review period for the December rebalance of the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) ends in 6 trading days.
  • Following the market consultation and reduction in the turnover ratio, there could be four changes to the index. The DTAC/TRUE merger could result in another inclusion in Q1 2023.
  • Estimated one-way turnover at the December rebalance is 8.1% and will result in a one-way trade of THB 7.4bn. More than 1x ADV to trade on most stocks.

China Huarong (2799 HK): Full Circulation & MSCI/FTSE Index Inclusion

By Brian Freitas

  • China Huarong Asset Management (2799 HK) has announced the full conversion of 8.358bn Domestic Shares to H-shares. The increased float could help the stock get added to the MSCI/FTSE indices.
  • Depending on when the conversion is completed, the stock could be added to the MSCI China Index at the February QCIR though inclusion in May is more likely.
  • There is a high probability of inclusion in the FTSE indices at the March SAIR – though it remains to be seen if that’s to the All-World or All-Cap Index.

Link Admin Is Cheap Amid PEXA In-Specie And Possible BCM/CM Sale

By David Blennerhassett

  • Link Administration (LNK AU) has released the explanatory memorandum regarding the PEXA Group (PXA AU) in-specie distribution. 
  • Link shareholders will receive one PEXA share for every 7.52 Link shares. Shareholders will vote on the distribution on the 23 December. The IE, rightfully, deemed the process fair.
  • If D&D buys Link’s BCM/CM ops for A$1.27bn, Link would be net cash of ~A$1.40/share versus an ex-entitlement price of ~A$1.58/share. And Link would still hold the lucrative RSS ops. 

Skymark Airlines Pre-IPO – Highly Leveraged with a History of Bankruptcy

By Ethan Aw

  • Skymark Airlines (9204 JP) is looking to raise approximately US$218m in its upcoming Japan IPO.  
  • Skymark Airlines (SA) is a Japanese low-cost airline, being the third largest domestic airline  according to the company. Unlike major airlines and other low-cost carriers, Skymark operates only domestic flights.
  • In this note, we talk about the company’s past performance.

💡 Before it’s here, it’s on Smartkarma

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  • ✓ Unlimited Research Summaries
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  • ✓ Custom Watchlists
  • ✓ Company Data and News
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